ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-3(1)(1),AHMEDABAD, AHMEDABAD vs. MAHESH MOHANBHAI PATEL(HUF), AHMEDABAD

This appeal by the Revenue is directed against the order dated 28.03.2024 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Bengaluru [hereinafter referred to as “CIT(A)”], under section 250 of the Income-tax Act, 1961[hereinafter referred to as “the Act”], for the Assessment Year 2020–21 arising out of the intimation dated 29.11.2021 passed by the Centralised Processing Centre, Bengaluru [hereinafter referred to as “CPC”].

The assessee is a HUF, proprietor of Deep Pharma, who filed its return of income for A.Y. 2020–21 declaring a total income of Rs.85,70,990/-. The return was processed under section 143(1) by the CPC, Bengaluru, vide intimation dated 29.11.2021, wherein the total income was enhanced to Rs.5,09,26,630/- and demand of Rs.2,13,00,550/- was raised. The increase in income was due to two adjustments made in the intimation under section 143(1)(a):

Aggrieved, the assessee preferred an appeal before the CIT(A). The assessee also sought condonation of delay in filing the appeal, which was accepted by the CIT(A) citing reasonable cause due to illness during the COVID-19 pandemic. Before the CIT(A), the assessee contended that the amount of Rs.4,20,39,630/- was not a real expenditure but a contingent liability merely disclosed in the tax audit report under clause 21(g) for disclosure purposes and was never debited to the profit and loss account. To support its contention, the assessee filed the revised Tax Audit Report, Auditor’s certificate clarifying the inadvertent mention and Copies of audited financial statements. As regards the disallowance of Rs.3,16,017/-, the assessee submitted that the same was already disallowed suo motu in the return of income, and the CPC made a duplicate disallowance under two different heads in the intimation. The assessee also placed reliance on some judicial precedents including –

The CIT(A), after examining the profit and loss account and revised tax audit report, concluded that no actual amount was debited towards contingent liability. The disclosure under clause 21(g) was found to be for informational purposes only and not part of income computation. On the disallowance of Rs.3,16,017/-, the CIT(A) accepted that the assessee had already disallowed the amount in the return, and the CPC disallowance resulted in duplication. The revised tax audit report and auditor’s certificate corroborated this. Relying on the decisions cited by the assessee, the CIT(A) deleted both additions and allowed the appeal.

Aggrieved by the order of CIT(A) preferred an appeal before us raising following grounds:

During the course of hearing before us, no one appeared on behalf of the assessee. However, the learned Departmental Representative (DR) fairly conceded that the submissions of the assessee before the lower authorities were correct in facts. The DR admitted that the additions were made primarily on the basis of disclosures in the tax audit report and not on any real entries in the books of account or profit and loss account. The DR left the matter to the discretion of the Bench.

Regarding the disallowance of Rs.3,16,017/- for employees’ PF, the assessee had already disallowed the same while computing total income. We have also noted from the statement of total income placed on the record (paper book page No. 31) that the said amount is added to the total income by the assessee as disallowable u/s 36 of the Act. The CPC’s duplication of the same disallowance is clearly apparent from the intimation. The CIT(A)’s finding is based on correct appreciation of facts and supported by the revised tax audit report and auditor's certificate.

In view of the above discussion and binding judicial precedents, we find no infirmity in the order passed by the CIT(A). Both the

In the result the appeal filed by the Revenue is dismissed.